Bank of America (NYSE:BAC), GE (NYSE:GE), and JP Morgan (NYSE:JPM) are among big name banks (NYSE:KBE) that may repay their loans under the FDIC’s Temporary Liquidity Guarantee Program. Slack loan demand and bulging cash deposits means banks will decline a roll over of their $231B lent to them in an attempt to stimulate the economy.
Investing Insights: JPM Earnings Are This Ugly Without Accounting Tricks.
General Electric Capital Corp (NYSE:GE), the finance arm of Fairfield, Connecticut-based GE, is the biggest user of guarantees with $45 billion outstanding according to the FDIC. Citigroup (NYSE:C) is second with $44 billion. Total loans and leases dropped 8.6 percent at midyear. According to FDIC data, it is down from 2008’s second quarter to $7.31 trillion. Regulators are trying to avoid future shocks by pushing banks to reduce risk and build capital.
“There really were two objectives, to stabilize the financial system and, over time, get the economy growing,” said Pri de Silva, an analyst with New York-based CreditSights Inc. who expects most of the securities to be paid down. “They achieved the first, but I don’t think the growth part happened,” according to Bloomberg.